Myanmar's Economic Isolation From The West Is Beginning To End

Myanmar's president
Thein Sein has said his country has no intention of
backtracking on its democratic reforms.

The U.S. imposed sanctions on Myanmar soon after its military
failed to recognize the results of the 1990 elections,
kicking-off an extended period of economic isolation from the
West. The sanctions included a blanket ban on their imports and a
ban on U.S. financial services to Myanmar.

Reconciliation With The West

The country first began making overtures to the West with its
2010 elections, and the release of its most famous political
prisoner Aung San Suu Kyi that same year.

On January 4, 2011, the country's independence day, its nominally
civilian government released some of its political prisoners.
This was followed by the release of 651 prisoners on January 13.
Myanmar is also engaging in peace talks with ethnic rebels. This
was a crucial criterion for any hopes of a reconciliation with
the U.S. and prompted U.S. Secretary of State Hilary Clinton to
say that the
U.S. would restore full diplomatic relations with Myanmar.

David Steinberg, Distinguished Professor at Georgetown
University, and a Myanmar specialist thought Clinton's visit was
well timed:

"Clinton’s visit was brilliant for two reasons. It was in
response to a Burmese need for support for the reforms. First, by
sending Hilary we didn’t promise anything, but had a response
that was appropriate to for the situation. Secondly, her visit
didn’t need Congressional approval, which will be needed to
eliminate the sanctions."

Some argue that U.S. sanctions haven't done the U.S. any favors.
The U.S. hurt its own economic interests leaving Myanmar's
resources to be plundered by Asian countries, like China, with no
competition from the West. Myanmar is vastly rich in resources
like teak, oil and gas, jade, and provides cheap labor.

Recently, the country awarded
10 onshore oil and gas blocks to eight firms. The country had
proven gas reserves of 11.8 trillion cubic feet at the end
of-2010, and is being tapped by energy hungry China and India.
London-listed Indian company
Jubilant Energy won one block and is planning to invest $70
million - $80 million in it, and is already in talks to buy
another stake.

With Western countries still kept away by sanctions on Myanmar
most of the blocks are being awarded to Asian companies. Dr.
Thein Swe, Senior Professor of Economics, Finance and Globalization at South East Asian Institute of
Global Studies said:

"Although Western investors and energy companies are late to
compete in the 10 oil and gas blocks, there are many areas and
regions in the resource rich Myanmar for Western companies for
investment opportunities when the economic sanctions are removed.

...US companies are already visiting Myanmar getting ready to
invest and participate in the economic development of Myanmar.
Similarly, UK, Japan, South Korea, France, Norway, Denmark, and
many other countries including other ASEAN and Asian
countries are already sending their companies to look into
opportunities for investments in Myanmar."

Myanmar is also becoming important from a strategic point of
view. President Obama has already said that the Asia-Pacific
region is fast becoming a priority for the U.S. Steinberg agrees:

"The U.S. has diverse national interests in Burma that the US has
not articulated, and the Obama administration has rethought US
policy as effectively as it could given US domestic political
concerns.

If the reforms continue, the Obama administration can point to
their only successful foreign relations achievement in East Asia–
they can’t do that in Korea, Iran, Palestine, but they will say
we contributed to that change. And the sanctions… they will
likely be eroded rather than eliminated."

But it's unclear how much a civilian government could control the
economy. Myanmar's GDP figures are considered wildly unreliable,
its inflation is high, and its infrastructure is in shambles.
Even if the country had fair elections in April and the U.S. and
the West lifted their sanctions on the country, the military
would still be able to interfere with the economy.

Steinberg points out that the military still controls three huge
institutions. The Ministry of Defence – which controls not only
the army, navy, and air force, but also the office of procurement
which produces goods for the army and the civilian population. It
also controls the Union of Myanmar Economic Holdings, which
controls gem trade, banking and construction, directly and
through subsidiaries, and the Myanmar Economic Corp which
controls economic activities as varied as tourism, trading
companies, and, the sale of petroleum and natural gas. According
to Steinberg:

"...The military will still control their own consumption and all
these elements mean that they can interfere and strongly
influence where the economy is going.

The military is important to the economy but the economy does not
depend on them. The problem is that there is very little credit
for economic enterprises, and the concern is that the Chinese
will control private credit as they are playing an increasingly
important role. It is important that the Burmese perceive that
they control the economy, not foreigners, otherwise there could
be a strong nationalistic response like there has been in the
past."

Though Myanmar's President is trying hard to prove that he is
sincere in his reforms, his country is still considered a
failed state. Not only because it is in desperate need for
economic development but also because some argue that the
benefits have not trickled down to the people. Some see civil
unrest brimming under this much lauded reconciliation.

What to expect

If Myanmar expects to see these reforms stick, it needs to show
its people some change and it needs military backing. Swe says:

"We need to be realistic that these process of reforms will
succeed if the decades-long powerful military also support and
accept these changes and reforms.

Secondly, the civil war and ethnic violence that began since
Independence in 1948 need to be resolved peacefully and
equitably.

There are many dangers on the road to reforms. The most crucial
factor is how far the powerful military which traditionally
dominated the political process of the country support this
reform process."

Meanwhile, Steinberg thinks the Burmese need to believe the
reforms are their idea:

"The real question to ask about the reforms is not whether they
are moving too quickly from a foreign perspective, but when would
the Burmese feel comfortable doing it? I have long advocated the
Burmese pushing through reforms on a Burmese calendar, so as not
to appear like they are being done on U.S. terms.

I do think these reforms are intended to be permanent. There are
some forces that don’t want to see these reforms. What’s
important though, is that the Burmese think the reforms are
coming from them rather than foreigners."

Leading up to the April elections, Myanmar's story will develop
rapidly. The world will watch closely as she continues her
transition.